Minimum Wage is Not Working

Minimum Wage
From Wikipedia

As a business owner, why shouldn’t I get a price break when I hire someone when there is a competitive marketplace for jobs?  I would be able to hire someone quicker at  a lower rate as I am rebuilding my business after taking a hit in the recession.  This allows me to utilize a lower priced person and to help return people to work sooner.

This has nothing to do with respect.  This is basic economics.  If the supply goes up, the price should go down.  If it doesn’t, then people and business are reluctant to buy because the relative cost is too high.  For example, in my case, I was contacted by both a 15-year-old and a 20-year-old who are applying for the cleaning  job I advertised.  Neither of them have much experience cleaning.  They are competing with women who are highly experienced who charge much more per hour.  One was as high as $30 per hour.  What I see is that the marketplace has a huge range.  Those who are skilled can command a high price.  But there is a hiccup at the low-end of the scale.  The inexperienced and unskilled simply can’t find a job which means they have absolutely no income at all because they can’t compete in the marketplace.

We aren’t creating a society where everyone is taken care of.  We are creating a society where there are people who aren’t employable because the minimum wage sets a threshold they can’t meet.  I sometimes hear the rhetoric that “there are too many poor people, we should raise the minimum wage.”  I believe this is incorrect logic.  Raising minimum wage takes away a person’s right to choose to work at a lower price in order to get work.  If a worker can earn some money to feed his/her family, they can do what needs to be done to support their family and to be at choice.   If a person can’t compete on price and doesn’t have an employment profile that makes him/her employable at minimum wage, that person has no choice but to go on some kind of public assistance.

We hear rhetoric about inflation being one of the problems.  Minimum wage is a huge barrier to natural market correction that would allow deflation to happen.  Because the minimum wage is fixed and contributes greatly to the costs of getting goods to market, there is difficulty for the business owner in adjusting product costs to fit market conditions.  This contributes to the sustained contraction of the economy.  Business can cut costs and sell at a loss in the early days of the recession, but since their labor costs are fixed they have huge incentive to take jobs out of North America or to automate.  If we would allow our unemployed workforce to work below minimum wage, businesses could afford to keep jobs in North America and the unemployment rate would improve.  As the economy warms, the labor force will be in shorter and shorter supply, thus naturally raising the wage rate to hire the workforce.  I have heard this is happening overseas.  As a labor force becomes more scarce, the price goes up.  Unfortunately this is happening in the other countries where we have exported our jobs, instead of employing our ready and unemployed workforce at home.